The Basics of Cryptocurrency and the Way It Works

In the time we live in, technology has made incredible advances compared to any time in the past. This evolution has redefined human life in almost every case. Indeed, this evolution is an ongoing process and thus, human life on earth is constantly improving day by day. One of the latest inclusions in this area is cryptocurrency.

Cryptocurrency is nothing more than a digital currency, designed to keep security and identity confidential in online financial transactions. It uses cryptographic encryption to generate currency and verify transactions. The new currencies are created by a process called mining, where transactions are recorded on a public ledger, called a transaction block chain.

Slight backtrack

The evolution of cryptocurrency is mainly responsible for the virtual world of the web and it involves the process of converting explicit information into a code, which is almost irresistible. Thus, it became easier to track currency purchases and transfers. Cryptography, developed by WWII to secure communication, has evolved in this digital age, merging with mathematical theory and computer science. Thus, it is now used to secure not only communication and information, but also money transfers across the virtual web.

How to use cryptocurrency

It is very easy for ordinary people to use this digital currency. Just follow the steps below:

  • You need a digital wallet (of course, to save money)
  • Use the wallet to create a unique public address (this enables you to get money)
  • Use public addresses to transfer funds inside or outside the wallet

Cryptocurrency Wallet

A cryptocurrency wallet is nothing more than a software program capable of storing keys, both private and public. In addition, it can interact with various blockchains, allowing users to send and receive digital currency and monitor their balances.

The way digital wallets work

Unlike conventional wallets that we carry in our pockets, digital wallets do not store coins. In fact, the concept of blockchain has been so cleverly blended with cryptocurrency that currencies are never stored in a specific place. Nor do they exist anywhere in hard cash or physical form. Blockchain only records your transactions and nothing else.

Real life examples

Suppose a friend sends you some digital currency, say in the form of bitcoin. What this friend does is transfer ownership of the coin to your wallet address. Now, when you want to use that money, you have unlocked the fund.

To unlock the funds, you need to match the private key in your wallet to the public address where the coins were allocated. Only when both these private and public addresses match will be credited to your account and your wallet balance will swell. At the same time the balance of the digital currency sender will decrease. In transactions involving digital currency, the actual exchange of real money never occurs.

Understanding cryptocurrency addresses

By nature, it is a universal address with a unique string of characters. This enables a user or owner of a digital wallet to receive cryptocurrency from others. Each public address that is created corresponds to a personal address. This proves automatic matching or establishes ownership of a public address. For a more practical analogy, you might consider a universal cryptocurrency address as your email address where others can send emails. Email is the currency that people send you.

The latest version of the technology in the form of cryptocurrency is not difficult to understand. One needs to have a little interest and spend time on the net to clear the basics.

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